The essence of our case is that the client’s site was blocked by court order. At the same time, the client did not have any information about violations of the legislation of the Russian Federation, as well as about the subsequent trial, he was not involved in the case. The only source of information on the case is the text of the decision published on the court's website. Based on the arguments of the court decision, we built our legal position for appeal.
After reviewing the court’s decision, we found out that the prosecutor filed an administrative lawsuit to recognize the information contained on the site, which is prohibited for distribution in Russia. The client’s site provides services for interacting with various cryptocurrencies. The prosecutor with links to Art. 27Federal Law of 10.07.2002 No. 86 "On the Central Bank of the Russian Federation (Bank of Russia)" (hereinafter - the "Law on the Central Bank") indicated that cryptocurrencies are monetary surrogates, they contribute to the growth of the shadow economy and cannot be used by anyone on territory of the Russian Federation for illegal purposes, and therefore the site information must be recognized as prohibited, and the site must be entered into the Unified Register of Domain Names, Indexes of Site Pages on the Internet and Network Addresses that allow identifying sites on the Internet containing information, distribution which is prohibited in the Russian Federation (ERDI). The court satisfied the demands of the prosecutor, and three months later Roskomnadzor complied with the court's decision and added the site to ERDI.
We are now at the stage of appealing the court decision. We based the appeal on these arguments:
1. The court did not involve the site owner in the case, although by virtue of paragraph 1 of Art. 265.3 of the Code of Administrative Procedure of the Russian Federation (CAS RF) was obliged to do this, since the decision affects the rights and legitimate interests of the site owner. In this regard, the decision is subject to unconditional cancellation on the basis of paragraph 4 of part 1 of Art. 310 CAS RF.
2. The court's conclusions that cryptocurrencies are monetary surrogates are not substantiated. The court in its decision referred to the outdated positions of Rosfinmonitoring and the Bank of Russia, based on the "restraining letters" of 2014-2015. Now they have lost their relevance, there is no other justification in the court's decision.
3. It does not follow from the content of the court decision how the information from the site can contribute to the commission of criminal offenses, or whether criminal or administrative liability is provided for the dissemination of information about cryptocurrencies. In this regard, it is reasonable to assume that the administrative plaintiff - the prosecutor - did not comply with the established paragraph 3 of part 2 of Art. 265.2 CAS RF and h. 1 Article. 62 CAS RF Evidence requirements.
To assess the extent of what is happening, let us dwell on each of the arguments in more detail.
1. Failure to attract the owner of the site to participate in the case on the recognition of information prohibited violates his rights and legitimate interests
Initially, the approach prevailed in judicial practice, according to which the recognition of information as illegal does not affect the rights and obligations of the site owner and does not affect its legitimate interests. Sarkis Darbinyan has already described the current situation in detail in his blog on the portal Zakon.ru .
Thanks to him, among other things, the Supreme Court suppressed this vicious practice in the ruling dated April 20, 2018 in case No. 78-17-101 (the "Bitcoininfo" case) and indicated that
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Accordingly, the failure to involve the site owner to participate in the case serves as an unconditional basis for canceling the decision .
This definition of the Supreme Court was the first of its kind and remains so at the moment. Now site owners have the opportunity to appeal the blocking on the administrative claims of the prosecutor. However, on the merits of the dispute - whether information about cryptocurrencies can be recognized as prohibited and on what grounds - the Supreme Court did not speak out.
2. Are cryptocurrencies monetary surrogates?
Lawyers themselves cannot yet answer this question. As Alexander Saveliev accurately points out , “neither in legal, nor in economic science any clear approach to the concept of“ money substitute ”has been formed, and the current legislation also does not disclose this term. In addition, Roman Yankovsky notes that neither article 27 of the Central Bank Law, nor article 75 of the Constitution of the Russian Federation formally prohibits the circulation of monetary surrogates and does not give their definition.
Why, then, do prosecutorial administrative lawsuits so stubbornly refer to the norm of Section 27 of the Central Bank Law and consider cryptocurrency a monetary substitute?
The position that cryptocurrencies are monetary surrogates dates back to 2014, and appeared thanks to representatives of the General Prosecutor's Office of the Russian Federation. Judging by the publication on the website of the Prosecutor General's Office, the argumentation of this position is based on citing the provisions of Art. 27 of the Law on the Central Bank, on the absence of real value security and on the absence of cryptocurrency owners to protect their interests in administrative and judicial procedures.
This approach has been preserved at the present time. The position of the Prosecutor General’s Office from 2014 was practically copied and applied in our business in 2020. However, this position seems unfounded. Yes, you can argue as much as you like about the legal nature of cryptocurrency and a monetary surrogate, but if the Civil Code allows the parties to a contractual relationship to independently determine counter-granting, then the mere use of a cryptocurrency by the parties cannot be a basis for recognizing it as a monetary surrogate.
3. To what extent can information about cryptocurrencies be prohibited?
It would seem that this is an excellent question for the courts to show their best side, and even to independently determine the regulation of already active relations, but for some reason the courts were modest. Even the Supreme Court in the already mentioned Bitcoininfo case remained silent on the merits.
Unfortunately, the only decision in which the judge tried to delve into the topic and show his own legal reasoning in the Tagilcoin case was quashed on procedural grounds. This is the decision of the Leninsky District Court of Nizhny Tagil of the Sverdlovsk Region of March 1, 2018 in case No. 2-508 / 2018 .
These findings of the court are especially noteworthy:
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The more you read these arguments, the more painful it is to realize that the decision was canceled, as they say, "out of stupidity": the case was considered according to the Civil Procedure Code of the Russian Federation, and not according to the rules of Chapter 27.1 of the CAS RF. This court decision in the Tagilcoin case was made a month before the Supreme Court ruling in the Bitcoininfo case and was much more substantial in its argumentation than the latter. And even after its cancellation, this decision can guide judges on similar cases and propose an argumentation algorithm that would meet the objectives of administrative proceedings. Nevertheless, the situation remains the same: sites are still blocked, and without the knowledge of their owners and without the presence of legal grounds.
What do we end up with? There is practically no doubt that the court of appeal will overturn the decision and send the case to the court of first instance to consider the case on the merits with the participation of the site owner. But there are serious doubts that the trial court will evaluate the arguments of the administrative plaintiff and our arguments on the merits with the same thoroughness as in the Tagilcoin case.
Moreover, there is no escape from the current legal ambiguities. It is unclear what the regulation of cryptocurrencies will be in light of the prohibitive May amendments to the draft law "On digital financial assets" (this is a question for separate discussion). It is unclear how the courts will decide cases that are somehow related to cryptocurrencies, and whether the situation will move from a dead center.
What to do? Trying to fight for every website blocked by the prosecutor and form a practice, or let everything go by itself and in fact refer a serious layer of reality to the marginal sphere? The Bitkoininfo case and the previous struggle of enthusiasts for the rights of site owners, as well as the latest decisions of the European Court of Human Rights on Russian blocking issues , definitely inspire optimism and indicate that the first approach works. But this is not enough, and without the coordinated actions of the community, it is unlikely that it will be possible to get off the ground. The more actively the community will appeal against the prosecutor's blocking and justify the complaints with the above arguments, the more chances that we will be heard and the situation will change for the better.